Merkel's conservative bloc had been against setting a minimum wage, arguing instead in favour of regional pay deals by employment sector. But it agreed to establish one as part of the deal to form a government with the left-leaning Social Democrats.

Federal Labor Minister Andrea Nahles said Wednesday that a minimum wage "will provide greater fairness" in Germany and result in better earnings for some four million people.

The proposal, which is expected to get Parliamentary approval, would go into effect Jan. 1, 2015 and employers would have two years to phase it in.